Michigan to appoint emergency manager for Detroit

Associated PressFriday, March 01, 2013

Credit: The Associated Press

In this Feb. 21, 2013 file photo, Michigan Gov. Rick Snyder discusses the effect of Detroit's drastic population loss over 60 years, which he says is the main reason for the city's financial woes during a news conference at his office in Detroit. Snyder said Friday, March 1, that he has declared a financial emergency in Detroit, a determination that could lead to the appointment of an emergency manager over the city's finances.

DETROIT — Michigan's governor said Friday that unless Detroit's fortunes suddenly and miraculously improve, he will appoint an emergency manager to take control of the city that was once one of the nation's most prosperous manufacturing centers.

If the governor follows through with his plan, Detroit would become the largest city in the United States to have its finances placed under state control.

"In many respects, I describe today as both a sad day ... saying there's a financial emergency in Detroit, but also a day of optimism and promise because it's time to start moving forward and solving these problems," Snyder told The Associated Press ahead of a community forum at Wayne State University.

Mayor Dave Bing, who has long opposed the appointment of a manager, said Friday that he would look at the impact of Snyder's decision and other options to determine what to do next. He has a 10-day appeal period in which to present a better turnaround plan or point out flaws in a report by a review team that spent two months delving into the city's books.

"If, in fact, the appointment of an emergency financial manager both stabilizes the city fiscally and supports our restructuring initiatives, which improve the quality of life for our citizens, then I think there is a way for us to work together," Bing said in an emailed statement.

Detroit has a $327 million budget deficit and faces more than $14 billion in long-term debt. It has been making ends meet on a month-to-month basis with the help of bond money held in a state escrow account. The city has also instituted mandatory unpaid days off for many city workers.

Those troubles, along with underfunded city services such as police and fire departments and the absence of legitimate turnaround plans from Bing and the City Council, forced his hand, Snyder said.

"Citizens are not getting the services they deserve and need, public safety, lighting, transportation — all those areas need help, and it's time to call all hands on deck and say let's all work together."

Snyder said he has a top candidate picked out for the emergency manager job, but he would not elaborate except to say the person had "strong financial" and "strong legal knowledge."

Emergency managers have the power under state law to develop financial plans, renegotiate labor contracts, revise and approve budgets to help control spending, sell off some city assets and suspend the salaries of elected officials.

"The role here is to be that supportive partner and to work on projects where we could really make a difference," Snyder said, adding there is no "big bailout coming" from the state.

Detroit would be the largest city in the United States to come under state oversight, according to James Hohman, assistant director of Fiscal Policy at the Mackinac Center for Public Policy, a free-market think tank based in Midland, Mich.

In Michigan, Detroit would be the sixth city placed under state oversight. Pontiac, Flint, Ecorse, Allen Park and Benton Harbor already have managers, as do public school districts in Detroit, Highland Park and Muskegon Heights.

A review team first looked into Detroit's books in December 2011 but stopped short of declaring a financial emergency. A second team began to pore over the city's finances again this past December and gave Snyder a report last month that said the city's accumulated deficit as of June 30, 2012, would have topped $900 million if leaders in previous years had not issued bonds.

The review team also said that because of Detroit's cash deficit, the city would have had to either increase revenues or decrease expenditures — or both — by about $15 million per month for three months starting in January to "remain financially viable."

A brochure produced by the state and distributed Friday said that an emergency manager could "more quickly and efficiently reform the finances in the city and stop the cycle of overspending and one-time fixes. Solving the structural problems will create a strong financial foundation that will allow Detroit to survive."

Snyder's declaration is the latest in a string of embarrassing setbacks to befall Detroit in recent years.

Explicit text messages made public in 2008 revealed the tawdry affairs and other shenanigans by the city's then-Mayor Kwame Kilpatrick, leading to criminal charges and eventually prison time for him.

The 2010 census revealed that Detroit — which at one time was the symbol of American progress and held great political power thanks to the auto industry — had lost a quarter-million people over the previous decade.

An undermanned and underpaid police force sometimes appears overwhelmed by the city's high violent crime rate, and the number of murders is on the rise.

Snyder said he expects an emergency manager to get to work immediately once appointed.

"It took 50 or 60 years to get in this situation, so it doesn't turnaround overnight," Snyder told the AP. "I would hope there are more low-hanging-fruit things that can be done fairly quickly to start showing there's a difference going on."